Siebel Systems has unveiled the substandard first-quarter earnings that led to its ousting of former CEO Michael Lawrie and the hiring of longtime board member George Shaheen. The company suffered a first quarter GAAP net loss--$4 million--or 1 cent per share, compared to first quarter 2004's profit of 6 cents per share. Total revenues for the first quarter of 2005 were $298.9 million, down from first-quarter 2004's total revenues of $329.3 million. Maintenance revenues were $123 million in comparison to first-quarter 2004's maintenance revenues of $114.9 million. Professional services and other revenues of $101 million, while services and other revenues from first-quarter 2004 were $87.6 million.
The company's biggest blow came from its license revenues plummeting by just more than $50 million from its first-quarter 2004 posting of $126.8 million to first-quarter 2005's $75 million. Siebel also announced quarterly highlights, including deploying about 290,000 additional live CRM users, a company record.
Shaheen admitted during Wednesday's earnings call that "we were all disappointed by our financial performance," leaving industry analysts debating Siebel's next move. Martin Schneider, enterprise software analyst at The 451 Group, maintains that Siebel needs to execute in the midmarket. "The writing is really on the wall in that Siebel needs to become a leaner, meaner operating entity if it still wants to be a CRM leader, but the last frontier is in the midmarket," he says. In March the company announced its seventh release of Siebel CRM OnDemand, which included functionality from its Ineto Services acquisition, but Schneider expects interest in seeing how well Siebel can straddle the fence between an enterprise company and "having the attributes of those more nimble midmarket players that are a little more versatile in the way that they can deploy and sell."
The company has taken some hits in recent weeks, but Chris Selland, industry analyst at Covington Associates, contends that it is still a very solid company with a solid customer base. The important thing, he says, is to demonstrate stability. "If they were to start flailing around with nine new initiatives and all sorts of new news, that would not make a lot of sense for them. At this point they need to settle down and eventually get Shaheen out there to say, 'Here is what we are doing going forward, but in the meantime we're not going away, we're not panicking. We had a bad quarter, we needed to make a change, we made it, and we're still the leader in the industry.'"
Schneider also maintains that Siebel's earnings are not a sign "that it's losing its grip on the market," he says, but "it's just the way that it's going to see revenue and the way that it's going to develop its products is going to have to change." The company will look more stable if it streamlines operations, he says. But on the other hand, "you never know. This could all just be preparing them to get bought by somebody."
Overall, though, Selland says the company is taking the right approach: "A lot of people were saying in his first conference call, Shaheen didn't say anything interesting....In a lot of ways it was probably one of the best things he could do--just say, 'I've got to get my hands around things.' People were disappointed that they didn't hear more, 'I've got brand new ideas and I'm going to take the company in a whole new direction.' " That, Selland says, is "the least thing they need to do."
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